MSCI (MSCI) Q1 2026 Earnings Call Transcript

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DATE

April 21, 2026 at 11:00 a.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — Henry Fernandez
• Chief Financial Officer — Andy Wiechmann
• Head of Investor Relations — Jeremy Ulan

TAKEAWAYS

• Organic Revenue Growth -- Over 13%, as explicitly reported by management.
• Adjusted Earnings per Share -- Nearly 14% growth, with accompanying adjusted EBITDA growth of almost 19%.
• Total Run Rate Growth -- Nearly 13%, with a record asset-based fee (ABF) run rate of $872 million, increasing 25%.
• Recurring Subscription Run Rate -- Growth of 9%, supported by net new recurring subscription sales of $39.6 million, a 52% increase.
• Retention Rate -- 95.4% across all product lines, reflecting high client loyalty.
• Share Repurchases -- Over $464 million in buybacks at an average price of approximately $556 per share.
• Acquisitions -- Three small bolt-on acquisitions completed in key growth areas: Compass Financial Technologies, VantageR, and PM Insight.
• Asia Pacific (APAC) Recurring Sales -- $15 million, up 46%, marking the strongest Q1 on record for the region.
• Index Segment -- Subscription run rate growth of 10.7%; record Q1 recurring sales near $33 million, driven by market cap indices and custom index growth.
• Assets Under Management (AUM) -- Over $21 trillion benchmarked to MSCI (NYSE:MSCI) indices; $7.4 trillion in indexed equity, including $2.4 trillion in ETF products and $4.9 trillion in non-ETF products.
• Derivative Volume -- Q1 was the best quarter since 2023 for traded volumes and run rate from listed futures and options contracts linked to MSCI indices.
• IndexAI Insights Usage -- Hundreds of clients used the new connector since its late February launch, providing flexible data interrogation via AI models like ChatGPT and GLOWL.
• Private Capital Solutions (PCS) -- Recurring net new sales growth of nearly 44%, with daily private valuation indices and expanded private asset tools supporting adoption.
• Analytics Segment -- Recurring net new subscription sales of $8.2 million, a rise of nearly 55%; new enterprise risk tools and next-gen factor models launched for clients.
• Hedge Fund Subscription Run Rate -- 17% growth, with Q1 recurring net new sales around $12 million, setting a record in that segment.
• Banks and Broker-Dealers Run Rate -- Nearly 11% subscription run rate growth and almost $11 million in recurring net new sales, both reaching all-time Q1 highs for the segment.
• Asset Owner Run Rate -- Nearly 10% subscription run rate growth, driven by PCS and Analytics adoption among pension funds diversifying into private markets.
• Asset Manager Performance -- Over 6% subscription run rate growth; nearly 11% recurring net new sales growth and retention rate close to 96% in Q1.
• Index Organic Subscription Run Rate -- Over 10%, with record net new sales of $25 million, a 75% increase, benefiting from large deals with traders and hedge funds.
• Index Retention -- Nearly 97%, further improvement on retention for the segment.
• Equity ETF Inflows -- $103 billion in Q1, the highest on record, representing about 35% of all equity index-linked ETF flows; $46 billion from European-listed ETFs, which is nearly 50% of regional flows.
• Analytics Run Rate and Revenue -- High single-digit run rate growth; new recurring sales of $17 million (up 30%); Analytics revenue up over 10% as a result of large implementation (nonrecurring) volumes.
• Analytics Segment Revenue Outlook -- Year-over-year revenue growth expected to be roughly 5% in Q2.
• Private Capital Solutions Run Rate -- Accelerated to nearly 16% growth, led by transparency data and new analytical capabilities.
• Real Assets Segment -- Property transaction solutions continue to experience headwinds, though cancels improved and Index Intel sales for property benchmarking remained solid.
• Sustainability and Climate Segment -- New recurring sales grew modestly but were offset by higher cancels; muted growth is expected in the near term.
• Cash Position -- Close to $400 million in cash at quarter-end.
• Expense Guidance -- Trending toward top half of the full-year range, driven by strong ABF performance and gradual market appreciation assumptions in the second half of the year.
• Tax Rate Guidance -- Q1 effective tax rate was higher due to lower windfall benefits from vested share compensation; Q2 effective tax rate expected between 18% and 20%, with full-year outlook unchanged.
• AI Implementation -- All new products launched include AI (AI-native, AI-powered, or AI-enabled); management sees "significant early efficiencies" in data development and software productivity as a result of AI adoption.
• Index Product Launches -- The company launched as many products in Q1 as in the entire previous year, signaling acceleration in innovation and product velocity.

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RISKS

• Sustainability and Climate Segment Weakness -- "We are seeing clients focus spend on their most critical sustainability priorities, which leads to some down-sells, although it has also led to competitive wins for us. We expect these pressures and the muted growth in Sustainability and Climate to continue in the near term."
• Real Assets Property Transaction Headwinds -- Continued "headwinds with our property transaction solutions," indicating ongoing challenges in this area.
• Q1 Tax Rate Increase -- The effective tax rate rose this quarter due to "lower tax windfall benefits from the vesting of stock-based compensation compared to recent years," which may pressure net income for the period.

SUMMARY

Management reported robust organic revenue growth, adjusted earnings, and adjusted EBITDA growth, driven by double-digit expansion in core subscription and asset-based revenue streams. Large inflows to equity ETFs, particularly in Europe, reinforced MSCI's AUM-linked revenue growth, while adoption of AI-powered solutions proved integral to new product launches and operational efficiencies. The company accelerated product innovation, launching as many new offerings in the quarter as in the entire prior year, and completed acquisitions to extend capabilities in custom indices, private assets, and reference data. Significant traction was achieved across hedge funds, banks, broker-dealers, and asset owners, with client retention rates near historical highs. Despite broad momentum, muted growth and higher cancelations persisted in the Sustainability and Climate and Real Assets segments, tempering the overall outlook for these categories.

• Fernandez stated, "We launched an equal number of products in Q1 as we did in the full year of 2025," highlighting the intensified innovation pace.
• Analytics benefited from large, nonrecurring implementation revenues in the period, which management indicated could cause revenue growth in Q2 to moderate to "closer to 5%" before aligning with run rate trends thereafter.
• APAC recorded its strongest on record Q1 for recurring sales, at $15 million, demonstrating geographic diversification beyond North America and Europe.
• Q1 saw the highest-ever equity ETF inflows linked to MSCI indexes, with $103 billion in total, reflecting the company's central role in global fund flows.
• Private Capital Solutions segment net new recurring sales grew nearly 44%, strengthened by demand for transparency data and new valuation tools for private markets.
• AI functionality featured in all new product delivery, with management seeing "We are seeing significant early efficiencies in the use of AI across the whole board." in areas such as data and software development.
• The acquisition of Compass Financial Technologies is expected to extend MSCI's customization capabilities into asset classes including commodities and digital assets.
• Management noted that "muted growth in Sustainability and Climate" will likely persist near term due to rationalization of client spending priorities and ongoing competitive dynamics.

INDUSTRY GLOSSARY

• Asset-Based Fee (ABF): Recurring fees calculated as a percentage of assets under management or linked to MSCI-benchmarked products, including ETFs, mutual funds, and derivatives.
• Recurring Subscription Run Rate: Annualized value of active recurring revenue contracts across all product lines, excluding nonrecurring and asset-based components.
• IndexAI Insights: MSCI's AI-powered connector enabling clients to query and analyze index data and methodologies using large language models.
• Private Capital Solutions (PCS): Suite of MSCI tools providing data, benchmarks, valuations, and analytics for private markets, including private equity and private credit.

Full Conference Call Transcript

Jeremy Ulan: Thank you, Operator. Good day, and welcome to the MSCI Inc. First Quarter 2026 Earnings Conference Call. Earlier this morning, we issued a press release announcing our results for the first quarter of 2026. This press release, along with an earnings presentation, are available on our website, msci.com, under the Investor Relations tab. Let me remind you that this call contains forward-looking statements, which are governed by the language on the second slide of the presentation.

You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made, are based on current expectations and current economic conditions, and are subject to risks and uncertainties that may cause actual results to differ materially from the results anticipated in these forward-looking statements. For a discussion of additional risks and uncertainties, please see the risk factors and forward-looking statements disclaimer in our most recent Form 10-Ks and our other SEC filings. During today's call, in addition to results presented on the basis of U.S. GAAP, we also refer to non-GAAP measures.

You will find a reconciliation of our non-GAAP measures to the equivalent GAAP measures in the appendix of the earnings presentation. We will also discuss operating metrics such as run rate and retention rate. Important information regarding our use of operating metrics, such as run rate and retention rate, is available in the earnings presentation. On the call today are Henry Fernandez, our Chairman and CEO, and Andy Wiechmann, our Chief Financial Officer. With that, let me now turn the call over to Henry Fernandez. Henry?

Henry Fernandez: Thank you, Jeremy. Good day, everyone, and thank you for joining us. MSCI Inc.’s first quarter results affirm our foundational, mission-critical role in global investing while also showcasing the highly diversified nature of our business. Our key financial metrics included organic revenue growth of over 13%, adjusted EPS growth of nearly 14%, and adjusted EBITDA growth of almost 19%. We remain long-term believers in the MSCI Inc. franchise, and we are committed to maximizing value creation through the disciplined deployment of our excess capital. Between January 1 and yesterday, we repurchased more than $464 million of MSCI Inc. shares at an average price of about $556 per share.

In addition, we recently completed three very exciting and highly strategic small bolt-on acquisitions in key growth areas. Our Q1 operating metrics included total run rate growth of nearly 13%, fueled by a record asset-based fee run rate of $872 million, growing 25%, and recurring subscription run rate growth of 9%, fueled by net new recurring subscription sales of $39.6 million, growing 52%. It was our best first quarter for net new recurring subscription sales since 2022. The retention rate across all MSCI Inc. product lines was 95.4%.

Our increased business momentum is starting to reflect the relentless adoption of agentic AI in everything we do, ranging from how we capture data and build models and platforms, to how we launch and market our products, to how our people work every day. This momentum cuts across geographic regions, product lines, client segments, and asset classes. We did well in all regions in Q1, with Asia Pacific a particular standout. In fact, we posted our strongest ever Q1 on record for recurring sales in APAC, at $15 million, up 46% from a year earlier. Across product lines, MSCI Inc. has built our momentum through sales of both newer and more traditional solutions.

In Index, for example, subscription run rate growth returned to double digits in Q1 at 10.7%, and we achieved a record level of Q1 recurring sales at nearly $33 million. These results were driven mainly by our market cap indices, but we also delivered impressive growth in custom indices. With more than $21 trillion in AUM benchmarked to MSCI Inc. indices, the ecosystem around our products is scaling to new heights. This includes $7.4 trillion of indexed equity benchmarked to MSCI Inc. indices, comprised of $2.4 trillion in ETF products and $4.9 trillion in non-ETF products. Q1 was our best quarter since 2023 for traded volumes and run rate from listed futures and options contracts linked to MSCI Inc. indices.

This further reinforces the power of our ecosystem and our shared success with the MSCI Inc. exchange partners, including our new licensing agreement for options on MSCI Inc. indices listed on the New York Stock Exchange. AI is helping us capitalize on these trends by offering more flexibility, faster customization, and greater interoperability. For example, our new IndexAI Insights connector makes it easier for clients to answer questions about our index data and methodologies using their preferred AI large language models, such as GLOWL and ChatGPT, or on MSCI One. Hundreds of clients have used IndexAI Insights since our launch in late February.

MSCI Inc.’s recent acquisition of Compass Financial Technologies, a Swiss-based provider of index calculation services, extends our customization capabilities into additional asset classes, such as commodities, digital assets, and equity derivatives. Meanwhile, in Private Capital Solutions, we delivered recurring net new sales growth of nearly 44% in Q1 while driving adoption of both newer and established solutions. Some of our reimagined and innovative new tools include daily private valuation indices and benchmarks for private equity and private credit. MSCI Inc.’s AI capabilities in private assets have increased dramatically over the past year, including a new connector on cloud linked to our Private Capital Intelligence fund benchmarking.

We are helping allocators streamline the due diligence and evaluation of private fund managers at scale with our private asset due diligence platform. Our recent acquisition of VantageR, a platform built entirely on AI, accelerates our ability to help clients perform better due diligence when investing in private markets. Likewise, our acquisition of PM Insight earlier this month will help us deliver secondary market pricing, liquidity, and reference data, which will support more robust portfolio construction and the development of indices and analytics solutions. Turning back to MSCI Inc.’s Q1 performance, in Analytics, we drove recurring net new subscription sales of $8.2 million, up nearly 55%, reflecting large wins and renewals of our equity offerings and enterprise risk tools.

These wins underscore the continued innovation of our factor capabilities, such as our next-gen models and the release of basket-building solutions for the market-making and trading community. They also demonstrate our advancements across total portfolio solutions, including our unparalleled private asset coverage, as seen in our new private credit risk models. Among client segments, MSCI Inc. had an especially strong quarter with hedge funds and traders. Among hedge funds specifically, we posted subscription run rate growth of 17%, along with our highest ever level of Q1 recurring net new subscription sales, at roughly $12 million. These results were driven mainly by Index and Analytics. These wins included a seven-figure Index rebalancing deal with a top global hedge fund.

In Analytics, hedge funds are also licensing our crowded trade datasets to support their alpha generation. Among banks and broker-dealers, we delivered subscription run rate growth of almost 11%, along with our best ever Q1 for recurring net new sales at nearly $11 million. Shifting to asset owners, MSCI Inc. achieved subscription run rate growth of nearly 10%, driven by Private Capital Solutions and Analytics. As more pension funds diversify into private markets, we see growing demand for our total portfolio solutions and private asset tools, including our tools for benchmarking and for transparency.

Moving on to asset managers, we posted subscription run rate growth of over 6%, along with nearly 11% recurring net new sales growth, including notably strong growth in Analytics and a retention rate of close to 96%. MSCI Inc. is executing on key growth opportunities for the asset management segment, including advanced datasets, private assets, total portfolio solutions, and active ETFs. Looking at our Q1 performance as a whole, we once again demonstrated the benefits of our all-weather franchise. Our client segment and product diversification, recurring revenue financial model, and the growing liquidity and scale of the investment ecosystem linked to our indices and our IP are key strengths. Our ongoing technology- and AI-driven transformation will strengthen these advantages.

To help us lead that transformation, Dinesh Gupta joined MSCI Inc. last month as our new Chief Data Officer and Global Head of Operations. Dinesh came to us from Goldman Sachs, where he spent nearly three decades and held leadership roles spanning multiple business lines, including asset and wealth management. Dinesh served as Global Head of Data Engineering at Goldman, and he also led the organization responsible for building agentic AI platforms and machine learning capabilities across the whole firm. He is ideally suited to help MSCI Inc. strengthen our comprehensive data strategy, reinforce our technology- and AI-first mindset, and accelerate our transformation. And with that, let me turn the call over to Andy. Andy?

Andy Wiechmann: Thanks, Henry. As you indicated, it is a very exciting time to be at MSCI Inc. We closed one of the strongest first quarters in our history, reaffirming our traction across key initiatives. We are growing our market share and expanding our influence in the increasingly AI-centric investment industry. Index organic subscription run rate growth reaccelerated to low double-digit levels at over 10%, with record Q1 recurring net new sales of $25 million, up 75% year over year. We benefited from a few large deals with trader and hedge fund clients, where these opportunities included new custom index content, such as our non-ETF custom index and constituent datasets, which span rebalancing and history use cases.

Additionally, we had another quarter of strong traction with our market cap modules, where we saw success across asset managers, hedge funds, and broker-dealers. Index retention was nearly 97% for the quarter, further improving from last year’s levels. Asset-based fee run rate growth was 25%, fueled by the incredible flows to products linked to MSCI Inc. indexes. Equity ETFs linked to our indexes captured a record $103 billion of inflows during the quarter, representing roughly 35% of all flows in equity index-linked ETFs. To put that in context, the prior record for quarterly inflows was $67 billion, which occurred in the fourth quarter of last year.

Global investors continued to deploy significant capital into ETF and non-ETF products linked to MSCI Inc. developed markets ex U.S. indexes and MSCI Inc. emerging markets indexes. Additionally, our clients are seeing very strong performance in European-listed ETFs linked to our indexes. In general, we see attractive whitespace opportunities in the European market. Nearly $1.1 trillion of the $2.4 trillion of AUM in equity ETFs linked to our indexes comes from European-listed products. During the first quarter, we saw European-listed ETFs capture $46 billion of inflows, which was nearly 50% of all flows in the region.

In Analytics, run rate growth was in the high single digits, driven by new recurring sales of $17 million, which grew 30% from a year ago. We saw continued strength in equity Analytics, and we had some large enterprise risk and performance wins. The Analytics Q1 revenue growth was over 10%, although this reflected a higher volume of implementations recognized in non-recurring revenues. For Q2 2026, we currently expect Analytics year-over-year revenue growth to be roughly 5% for the quarter. In Private Capital Solutions, subscription run rate growth accelerated to nearly 16%. We have seen strong momentum with our transparency data, Private Capital Intelligence, and Total Plan offerings, all of which have benefited from numerous enhancements and new capabilities.

In Real Assets, we still face some headwinds with our property transaction solutions, although we had another quarter of improving cancels and solid sales of our Index Intel offering for property benchmarking use cases. In Sustainability and Climate, while new recurring sales grew modestly, they were offset by higher cancels. We are seeing clients focus spend on their most critical sustainability priorities, which leads to some down-sells, although it has also led to competitive wins for us. We expect these pressures and the muted growth in Sustainability and Climate to continue in the near term. Our capital position remains strong with close to $400 million of cash on our balance sheet at the end of March.

As Henry noted, we completed the acquisitions of VantageR and Compass during the first quarter and PM Insight earlier this month. These three acquisitions add a relatively modest contribution to run rate and ongoing expenses. On guidance, we updated our full-year outlook on D&A by $5 million to incorporate the impact of intangibles related to the acquisitions. Given the strong ABF performance, and the assumption of very gradual market appreciation in the back half of the year, we are trending to be in the top half of our expense guidance range. The Q1 effective tax rate reflected lower tax windfall benefits from the vesting of stock-based compensation compared to recent years.

I would highlight our effective tax rate outlook for 2026 is unchanged, and for Q2, we expect to have an effective tax rate between 18% and 20%. The free cash flow outlook for the full year is unchanged, although Q2 is seasonally the highest quarter for cash tax payments for us. Looking ahead, we have an attractive pipeline of opportunities as we drive adoption of our new and existing solutions across the investment landscape. Our strong start to 2026 reaffirms the mission-critical nature of our solutions in today’s AI-first economy. We are seeing solid momentum in delivering new products and capabilities, supported by enhanced go-to-market efforts, which are translating through to tangible results.

We are focused on meeting client needs and enhancing value across client segments. We look forward to keeping you posted on our progress. And with that, Operator, please open the line for questions.

Operator: Certainly. As a reminder, if you have a question, please press 1-1 on your telephone. We ask that you please limit yourself to one question each. You may get back in the queue as time allows. Our first question comes from the line of Alex Kramm from UBS. Your question, please.

Alex Kramm: Yeah, hey. Good morning, everyone. I just want to talk about the sales momentum a little bit here. I mean, the first quarter had a choppy ending with all the volatility in markets in March, so good to see still good momentum there. So just wondering, did anything slip given the environment? But more importantly, given the second quarter is generally a more important sales quarter for you, any kind of insight into what you are seeing so far, in particular in Index and Analytics? Thanks.

Henry Fernandez: Hi, Alex. Thanks for the question. Except for a slowdown in dialogue and presentations and, obviously, demos in the Gulf region—the countries in the Arabian Gulf region—we have not seen any effect of the Iran war anywhere else in the world. It has obviously been a bit surprising to us, but we have not seen clients pull back. We have not seen clients delay decisions. They have been operating on a business-as-usual basis, and that was the case at the end of March and also in the first three weeks of April. Thank you.

Operator: One moment for our next question. Our next question comes from the line of Manav Patnaik from Barclays. Your question, please.

Manav Patnaik: Thank you. Good morning. I just wanted a little bit more color. These are obviously some impressive net new sales numbers out there, especially in this environment where we all perceive your main customers to be budget challenged. Are you taking share? Are you just taking more of the wallet? Can you talk a little bit about some of the product areas, innovation, and where this growth is coming from?

Henry Fernandez: Yeah. In our own internal discussions and analysis, we have not seen—the operating environment and the end markets that we are serving have not changed for the last few quarters, not changed almost at all. A few things are a little better, a few things a little worse, but they have not changed. What has changed in terms of this performance of Q1, and also the past performance of Q4 of last year, is stronger execution across MSCI Inc. in three big categories. The first category is selling what we currently have—the products that we currently have—more aggressively, more creatively, more energetically across all client segments and all regions of the world.

Number two is significant acceleration of the launch of new products, or I should say the start of an acceleration in the launch of new products. We launched an equal number of products in Q1 as we did in the full year of 2025. And number three, a significant acceleration in adoption of AI tools in everything we do, along the lines of what I said in my prepared remarks. Those three areas have helped us increase our recurring and new, have bigger penetration, take market share away from competitors—especially in the Sustainability and Climate area—and grow faster.

We believe that, as we have said before, Q3 was a little bit of the bottom, Q4 was better, Q1 is better to expectations, and we think we are on a growth path here.

Operator: Thank you. Our next question comes from the line of Toni Kaplan from Morgan Stanley. Your question, please.

Toni Kaplan: Thanks so much. I was hoping if you could talk about whether you have seen any uptick to revenue specifically related to AI. I know you talked about the products built on AI. And any quantification around expense savings with regard to AI? Thanks.

Henry Fernandez: Yeah, Toni, basically every new product we are launching has an AI component to it. Some of them are AI native, some of them are AI powered, and some of them have some AI enablement. Depending on the product and the area, the importance of AI is very big in the AI-native ones or is just one of the ingredients that go into the launch of the product. That is pretty much across the board in any new product.

Therefore, we have been tracking last year the revenues associated with “AI products,” and we keep doing that, but it is almost irrelevant right now because everything that we are launching has an AI component to it—it is just a matter of degrees. The second part of your question is efficiencies. We are seeing significant early efficiencies in the use of AI across the whole board. That started in earnest in applying AI to the data and the data development in private assets and in Sustainability and Climate.

That has accelerated significantly to the point that it allows us to dramatically increase the amount of data gathering and data development with the same level of headcount that we have, rather than adding headcount. We are beginning to see significant productivity as well in software development—new software development, new software applications—and we have not yet started rewriting the current software that we have, in terms of either production or applications, with AI, but that will be a big project that we want to get into in the near future. And then thirdly, and also very importantly, we began to use AI across the board in the development of models and methodologies.

For example, in custom indices—we are ramping up the development of custom index capabilities—we are now using AI, obviously managed and monitored by our humans in our Research department, in the creation of custom indices at a much faster speed than we have ever done before. We are also using AI for Analytics models, and we just revamped the entire Sustainability ratings system, ESG ratings systems, using AI. That is in the process of being relaunched, and that is going to give us enormous productivity and scalability.

Andy Wiechmann: Toni, one other point to highlight which adds to the benefit side of the ledger from AI is we are starting to see clients that are interested in licensing more content and getting access to more content for AI-driven use cases. We think that is early days and potentially a huge opportunity for us—something we get very excited about given the unique content that we have. So, that added to all the points that Henry highlighted reaffirms that AI is definitely a boon for us.

Operator: Thank you. Our next question comes from the line of Owen Lau from Clear Street. Your question, please.

Owen Lau: Hi. Good morning. Thank you for taking my questions. So Analytics revenue was up over 10% year over year, and, Andy, you also mentioned that you had some pretty strong nonrecurring revenue related to implementation. Could you please talk about the outlook there, in specific for implementation? And then how high is the correlation between the strength of Index and the strength in Analytics in the first quarter? Thanks.

Andy Wiechmann: Sure. A few points there. Let me talk first about the momentum we are seeing in Analytics, which definitely has been encouraging. We continue to have strong success with our equity Analytics, and we had some big wins in the quarter, and we also had some nice wins on the multi-asset class side. The success that we saw in Analytics in the quarter was across multiple fronts. We are seeing strength across client segments. We continue to see very strong growth with hedge funds—we actually had 14% growth in Analytics with hedge funds.

We are also seeing strong momentum with banks, where we had 10% growth, and asset owners also are a big win area for us, which Henry highlighted earlier. A lot of that is enabled by our total portfolio capabilities, which really lean on our differentiated private content. We saw 9% growth with asset owners. So, good momentum across client segments. Our factor franchise continues to get a strong boost within the hedge fund community, but excitingly, we are seeing traction outside of hedge funds. We had some wins with traditional asset managers as well.

We are encouraged by the momentum across Analytics, and you see that in the run rate where we have been kind of steady in the high single-digit type area. Your comment about Analytics revenue growth is that there are some unique factors at play in the quarter. We did have a large implementation that was completed during the quarter, and hence you saw some meaningful nonrecurring revenues within Analytics, which drove the overall revenue growth to be slightly above 10% within the segment. As you have seen in the past, there can be some lumpiness with regard to when those implementations are completed and the comparisons to the prior-year period.

In Q2, we do expect the revenue growth to be more mid-single digits—so closer to 5%—within Analytics. Beyond Q2, we do expect the revenue growth to track much more closely to run rate growth. Looking forward longer term, we think run rate growth is a good indicator of the revenue growth and, as I alluded to, that is an area where we see good momentum and strong traction. Your question about correlation with Index—there are dynamics that are overlapping. Within the trading and hedge fund community, our content sets are very complementary. We have seen strong traction both in Analytics and in Index within that client segment. We also see general environmental factors at play that drive both.

As you can tell by the results, we had a good quarter in Index and a good quarter in Analytics, so there is some correlation there. But there are also different dynamics across different parts of the business, so I would say it really depends.

Operator: Thank you. Our next question comes from the line of Ashish Sabadra from RBC Capital Markets. Your question, please.

Ashish Sabadra: Thanks for taking my question. Really strong subscription run rate growth in hedge funds, asset owners, and broker-dealers. But I wanted to focus on the asset manager where it moderated a bit from 7%, I believe, last quarter to 6%. Can you just talk about the puts and takes there? How should we think about that momentum in asset managers going forward?

Andy Wiechmann: Sure. There are some FX factors at play with the growth rates in any given sector. We actually have seen good momentum and a pickup with asset managers in spots. As Henry alluded to earlier, we are benefiting from the innovations that we have made—the new product development—as well as just more generally enhanced execution, and that includes how we cover our asset manager clients. The success was multifaceted. We had success in licensing more content and broader usage of our tools across asset managers.

For many of the larger clients, we have taken more of an enterprise-type approach to how we work with them, and that leads to some very attractive additional licensing opportunities, and it also leads to more stability in the segment. As we alluded to, we saw very strong retention with asset managers in the quarter. From a geographic standpoint, we saw good momentum in EMEA and good momentum in APAC, and we have seen it both in Analytics and Index.

To double-click quickly: on the Index side, beyond broader licensing, we have released content sets that are helping these clients in the portfolio construction process, but also in the sales enablement process—meaning how they communicate to their clients and how they think about launching new products. We also have solution sets that are getting traction for active ETFs, and more generally supporting indexed investing in many forms and fashions. On the Analytics side, we have had some big multi-asset class wins, and we have also seen some traction with our factor franchise. Overall, it is encouraging.

A lot of it, as Henry alluded to, is driven by our efforts and our execution, and we continue to view asset managers as a key and core client segment for us.

Operator: Thank you. Our next question comes from the line of Craig Huber from Huber Research Partners. Your question, please.

Craig Huber: Thank you. Maybe just talk a little bit further about the little bit better numbers in Sustainability and Climate there. It is obviously nowhere back to where it was before. Seems like the environment for that has not dramatically changed here in recent quarters. But just talk about what is driving a little bit better momentum there, if you would, please. Thank you.

Henry Fernandez: Craig, it is important to start by differentiating Sustainability—formerly ESG—from Climate. They have been a little bit linked in the past, not because they have similar dynamics or supply and demand or competitive landscapes, but because sometimes the sales that we did were in one package, which we are increasingly separating. We believe that Sustainability we will continue to sell—and sell well—but there is a lot of rationalization of cost, and there is significant market share that we are taking away from competitors on Sustainability. On Climate, we are cautiously optimistic that at some point it will reaccelerate, especially in physical risk.

This past quarter, we had an important win with the central bank of Germany, which subscribed to a series of climate risk tools from our side on behalf of the European Central Bank system, which incorporates all the national central banks. We are very encouraged by that because it was a competitive win—we were selected as the best provider—and now we have the work of penetrating each one of the national central banks. That tells you how important they view climate risk and how important they view the MSCI Inc. offering.

We continue to focus on the transition elements of climate change, but very importantly, we are now more and more focused on the physical risk part, and we see increasing demand there. We believe that the Iran war and the energy shock that has come out of that will underscore significantly the energy transition that many countries need to make to ensure less dependence on oil and gas coming from the Gulf, and that is going to bode well for a lot of our tools.

Operator: Thank you. Our next question comes from the line of Alexander Hess from JPMorgan. Your question, please.

Alexander Hess: Hi, guys. I want to jump into the active ETF business. It seems like, from our data, there was some pickup in active ETFs more broadly, and they seem to be doing pretty well as a category. Maybe you could highlight what that business looks like, how that may have helped your fund flows in 1Q or not, and then anything we should understand about how you participate in that business and how that flows through your numbers? Thank you so much.

Henry Fernandez: We are very excited about that part of our business, for a number of reasons. First, we believe that this is an area of significant expansion by the active asset management industry. A lot of what they are getting hit with in outflows in mutual funds and other forms of active management, they can latch onto active ETFs and revive growth. This is a client base that we know exceedingly well. They recognize our datasets and our indices extremely well, and therefore we can be very helpful to them. Second, it is important to recognize that something like 70%–80% of the active ETFs that are being launched have some elements of systematic investing or index investing in them.

They are not pure-play stock-picking ETFs like some mutual funds could be. That is fertile territory for MSCI Inc. to be of significant help—in terms of the underlying database and the organization of the database, to the indices that are built on the database, and then to the quantitative tools that can be applied on top of the indices to do overlays that are more actively managed. We are very bullish about that.

Third, our role in this industry on the passive side is significant, as you know, and a lot of our clients are coming to us to help them on active ETFs because of our brand and the trust in our database, indices, and methodologies in order to build this active ETF business. We are very hopeful that will be a growth area for us with active managers around the world.

Andy Wiechmann: And, Alex, to answer the part about where it shows up in our financials: we are very actively used as a benchmark on active ETFs. Oftentimes that is not a new sale for us. If a client is licensed already for the module, when they use us as a benchmark on the active ETF, that is not going to be a new sale. But to the extent it helps with the health of the asset manager and helps them grow, that can lead to additional sales for us.

As Henry alluded to, we also license additional content sets—specific sets like our Index Universe data but also broader content sets—that can be used as part of the portfolio construction process, overlays, and risk management as part of our clients’ active ETF management. That is an additional module license for us on the subscription side. We have also launched our financial product license—this is where we can do more for the client and be an integral part of the overall portfolio management, including calculating the index on an ongoing basis—and that can translate through to ABF revenue. We can benefit both on the subscription side and the ABF side. It is very early days, so it is small for us.

We are getting good traction as a benchmark and have had quite a bit of success early days in licensing additional content sets, but we think the opportunity is much bigger going forward to help on both the ABF side and the subscription side.

Operator: Thank you. Our next question comes from the line of Faiza Alwy from Deutsche Bank. Your question, please.

Faiza Alwy: Yes, hi. Thank you so much. I wanted to ask about the strong growth that you saw in custom indexes. I am curious if it is driven by your ability to process things faster, or is it more a function of end market demand? Just trying to understand the sustainability of the higher growth that you saw this quarter.

Henry Fernandez: Basically, let us start with the end market demand. In systematic investing—and a big part of that is index investing—the vast majority of the historical work that we have done has been on market cap exposures. That is “give me the market cap of your emerging markets,” “give me the market cap of Japan or Europe,” or one way or another. What is now happening is that the door is now wide open to do systematic investing and rules-based investing—in what we call non-market cap—which is “give me a portfolio or an index of all the equity securities in the world that have low volatility, high quality, high ESG ratings, low climate risk,” or whatever the flavor.

That is an investment thesis, not just a market exposure. Therefore, there is incredible growth in that in equities. We are now seeing it in fixed income. We are even getting requests about that in private assets, like private credit or private equity. We are uniquely positioned to benefit from that because not only do we have the index universe, the index methodologies, and a great index brand, but we have all the other ingredients: we have the factor models to create factor compositions; we have the ESG ratings; we have the climate exposures; we have the thematic scores. We can put everything together to build an index.

Some of that gets translated into standard, off-the-shelf indices that we create, but the vast majority is coming into the form of a custom index—for either active management for active ETFs, for passive management in ETFs or institutional, for structured products, for an over-the-counter swap or option, and so on. The demand is very significant. We have been ramping up our ability to meet that demand. That comes in three components. First, the workflow application to help people and help us design these indices, and that is the acquisition of Foxbury.

Second, once you have that workflow application and you design what you are looking for, how do you link that to an industrial-scale production environment in which you have tens of thousands of custom indices being produced safely and with high quality? We have done that work already. Third, how do we accelerate the process of creating the methodology—the index algorithm? We were doing that with humans in our Research department, and we are now doing that with AI to help accelerate it. The demand is there.

We are meeting most of the demand, but we are leaving some money on the table, and with these improvements in these three areas, we are now well-positioned to capture the vast majority of this demand in the world, and we are uniquely positioned to achieve that.

Operator: Thank you. Our next question comes from the line of Analyst from Goldman Sachs, on behalf of George Tong. Your question, please.

Analyst: Hi. This is Anna on for George. We saw very strong AUM growth of ETFs linked to MSCI Inc. indices last quarter, especially in developed markets ex U.S. and emerging markets over the period of time. Can you provide more color around the momentum of the international inflows outside of the U.S.? How do you see the trends going forward? Additionally, do you expect the trends to drive broader subscription growth opportunities for you going forward, given MSCI Inc.’s unique exposure to international markets?

Andy Wiechmann: Sure. As you alluded to, we have a unique and differentiated franchise in ex-U.S. markets. If you look over the last ten years, we have captured about a 35% share of ex-U.S. equity ETF AUM. That sustained leadership is supported by consistent inflows, the strength of our comprehensive offering, our strong position with the asset owners of the world, and the fact that we really have fit-for-purpose indexes tailored to whatever need our clients have. Over that ten-year period, you saw meaningful outperformance of the U.S. market for most of the period, and we did fine during that period.

But over the last eighteen months, you have seen a rotation start to take place into international equities—non-U.S. equity exposure—and that has been a big benefit for us. We saw tremendous inflows throughout last year. We saw record inflows into ETFs linked to our indexes in the first quarter—north of $100 billion—and, importantly, we are capturing a significant percentage of the market share of those flows, which speaks to the strength of the franchise. Another stat to highlight: within the European-listed ETF markets, we have a very strong position. We captured 40% of flows into European-listed funds within the first quarter.

We also had very strong flow capture in the U.S. for international exposure products, but Europe has been an area of outsized strength for us. The growth in AUM in European-listed ETFs, and ETFs more generally, helps fuel the broader ecosystem for us. It drives more demand for clients to create new ETFs based on our indexes and helps in the derivatives markets, both over-the-counter and listed. It is an important point of strength. I do not want to speculate on what happens going forward, but given many of the fiscal and geopolitical dynamics at play, we have seen sustained momentum of outsized growth into international exposure areas, and that is a huge opportunity for us.

We have an all-weather franchise that can benefit in all environments, but this environment creates numerous opportunities across different product areas, client segments, and geographies for us.

Henry Fernandez: I normally say that we are only getting started in the indexed investing world and, in this case, the ETF world. The only thing that has been largely captured and conquered is market cap exposures. When you think about the non-market cap investment thesis—which is the vast majority of the investment process worldwide—it is being systematized, turned into rules-based, just like the active ETFs I was mentioning. There is now a revolution going on in fixed income as well, and in commodities and in equity derivatives.

The acquisition of Compass Financial that we made is going to help us dramatically penetrate other asset classes like commodities—creating indices and systematized structures for commodities, for cryptocurrencies, for other digital assets, and for equity derivatives. I want to make sure you pay attention to that acquisition because it is going to open up a lot of new doors for us. By and large, we are the provider of choice for these custom indices across the board. That has been the strength of our fixed income ETF franchise linked to MSCI Inc. indices—not the market cap fixed income indices, but the non-market cap, where there is an ESG overlay, a Climate overlay, or a Factor overlay.

You are seeing that growth. Lastly, to reinforce what Andy was saying: the two big ETF markets in the world are the U.S. and Europe. Our presence in Europe is $1.4 trillion-plus out of the $2.4 trillion, and we are extremely well positioned, capturing a significant amount of the flows there, in addition to the strength we have in the U.S.

Operator: Thank you. Our next question comes from the line of Scott Wurtzel from Wolfe Research. Your question, please.

Scott Wurtzel: Hey, guys. Thanks for taking my question. Just wanted to ask on the growth that you are seeing with hedge funds. It has been pretty impressive in this quarter and in the past couple quarters as well. I am just wondering if you can maybe contextualize what inning we are in this opportunity to sell into the hedge fund channel, given the growth that you have seen in recent quarters? Thanks.

Andy Wiechmann: Sure. Maybe I can broaden it to traders, broker-dealers, and hedge funds—what we have referred to as the trading ecosystem in the past. This has been a strong growth area for us, and it has been our highest growth area for the last couple of years, but it is also very strategic for us. We have seen growth in both Index—where we had 27% subscription run rate growth within Index with hedge funds—and in Analytics—where we saw 14% subscription run rate growth with hedge funds. We have similarly had very strong traction with trading firms and with broker-dealers. A lot of this is fueled by our actions.

We have benefited from the health and asset growth that you have seen within multi-strat hedge funds and the growth of certain strategies, but importantly, we have been actively innovating and enhancing the services that we deliver to these organizations, and we have been becoming much more of an enterprise-wide partner to many of them. We offer custom indexes used for structured products and over-the-counter derivatives, custom bespoke strategies, custom index stats and content sets used for systematic and index rebalancing strategies, related index methodology datasets, and we continue to enhance our risk models and broader systematic solutions, which create additional upsell opportunities. We believe this is a big market where we will be a critical partner to these organizations.

It is a sustainable area where we have a long way to go in terms of doing more for them at an enterprise level. As I alluded to earlier, this is very strategic for us as a firm because it helps fuel opportunities in the ETF market, the non-ETF passive market, and the over-the-counter market as well. It provides more liquidity and more opportunity for asset owners looking to implement index strategies, and opportunities within the wealth segment. It has been a nice growth engine in the short term within those three client segments, but more generally it is helping to fuel the power of the overall franchise for us.

We believe it is attractive and sustainable, and we continue to innovate and enhance our service there.

Operator: Our next question comes from the line of Analyst from Bank of America. Your question, please.

Analyst: Great. Going back to the net new, very notable in 1Q—great results. Andy, would you be able to disaggregate how much of that was due to larger, concentrated deals, which you alluded to in the prepared remarks, versus the substantial increase in product velocity and execution? Any comments on that would be helpful.

Andy Wiechmann: Sure. As Henry mentioned, we saw a notable pickup in the number of new products launched in the first quarter, and we also saw a notable increase in sales from new products compared to the first quarter of last year. Our actions are definitely playing a role in the acceleration in growth we have seen. If you look at where some of that momentum is, we have seen strong momentum in Index, where growth reaccelerated back to double digits. We have seen an acceleration in PCS on both fronts. We have been very active in the pace of new product development as well as enhancing our go-to-market efforts.

Things like new Index content sets that we have been delivering; within PCS, a host of new capabilities like our Document Management and Source View offerings; our asset- and deal-level metrics; and a number of content sets that are helping drive growth across basically all of our PCS offerings—all have been released in recent periods. On the custom index side, Henry alluded to that area where we have been heavily investing, broadening our capabilities, and becoming a partner of choice. There are probably some environmental aspects at play; the momentum is constructive, but a lot of the momentum has been driven by the efforts and actions that we have been taking.

Operator: Thank you. Our next question comes from the line of David Motemaden from Evercore ISI. Your question, please.

David Motemaden: Hey. Thanks for squeezing me in. I wanted to talk a little bit about some of the momentum since the February rollout of IndexAI Insights. It sounds like that is driving increased monetization, or at least a bit of a pickup in licensing data. How might the economics differ whether it is going through MSCI One or third-party apps like Copilot or ChatGPT? Thank you.

Andy Wiechmann: Sure. Consistent with our past approach, we want to make our content as easily accessible and available however clients want to get access to it. As we alluded to, you can get access to it through Cloud MCP, through MSCI One; we even have certain content sets available through Copilot. The economics are generally consistent regardless of how clients access it. Depending on how and where they are using it, there can be upcharges and upsells for us, but our goal is to make it easier for clients to access the content and use it in a multitude of use cases. This is one of those areas where we are increasing value to clients.

We have seen notable traction, given that we just released it in February, in clients accessing IndexAI Insights. Clients are getting more value out of the content sets they have, so they can query and interrogate what is going on in the index, what drives the methodology, and what the constituents are. It is also a natural upsell driver for them to ask for additional content sets and to want to get insight into our risk models across the firm. We think this is a key enabler. It does help support price increases on the margin and can lead to upcharges around usage.

This is step one for us, and over time, we think clients are going to want to use more of our content within their AI-driven processes. As they start to want to use that content to train models and use it as part of their AI investment processes, those are areas where there are meaningful sales opportunities for us. We are spending a lot of time thinking about the right licensing models there and how we can capitalize.

We know directly from our clients that they want to use our content heavily, and these initial ways that clients can access the content via AI channels are the first step, but we believe there is a long journey of additional things that we can do and opportunities to monetize the content we have.

Operator: Our next question comes from the line of Jason Haas from Wells Fargo. Your question, please.

Jason Haas: Hey, good afternoon. Thanks for taking my question. There has been a lot of fear in the private credit markets recently around credit risk. How is that impacting your PCS business? Is it a headwind or a tailwind? Thank you.

Henry Fernandez: It is definitely a tailwind for us. Think about it similarly to our Analytics offering. In equity factor Analytics and multi-asset class Analytics, the period of highest interest and highest demand is when there is a lot of volatility in the marketplace. What we are seeing right now in private credit is that, because of the lack of transparency on the funds, people do not understand the sector exposure of various credits, what the valuations are, what the liquidity is, and so on.

There is increasing interest in many of the tools that we provide: transparency tools to understand what is in the fund, the terms and conditions of the loans in the fund, the credit assessments—in our partnership with Moody’s—what is the market risk of those funds based on factors, and the like. We are increasingly focused on creating valuations on private credit. This is a major tailwind for us. There will be more and more people wanting to look at that in order to understand what they bought and whether they should keep it, sell it, or add to it.

Operator: Thank you. Our next question comes from the line of Kelsey Zhu from Autonomous. Your question, please.

Kelsey Zhu: Good morning. Thanks for taking my question. How does AI change the competitive dynamics for you, particularly for the Analytics business? Are you seeing any intensified competition there? And if so, is it coming from startups or large customers who may try to build some of these products themselves? Thanks a lot.

Henry Fernandez: It is a very good question. So far, we have not seen any kind of intense competition from either the traditional competitors of MSCI Inc. or the startups. We are not relaxed—we are monitoring and focused on that intensely to make sure that we continue to have a very deep and wide competitive moat. What we have seen is a significant acceleration from MSCI Inc. in terms of product creation: starting with gathering more data, accelerating the pace of model creation and methodologies and index production, and creating efficiencies that can help us save headcount and expenses that we can then reinvest into even more product creation and more distribution.

I believe that the ultimate big opportunity for us is not only in the data and the models and the enhancement of the software capabilities that we have, but in changing the business model of how our clients consume our content. As you know, a lot of our content is consumed either by our own applications—MSCI One, RiskManager, Private i, etc.—by clients’ own software applications, or by third-party applications that aggregate our content with others. Through what we are doing—significantly increasing the creation of agents that our clients can use to consume our content—we can change that. We can get clients to consume a lot more of our content with a lot more people in many different locations.

That is what we are aiming for in the medium to longer term, and that will dramatically redefine how clients consume our content and give us a lot more control and ability to expand.

Operator: Thank you. This does conclude the question-and-answer portion of today’s program. I would like to hand the program back to Henry Fernandez for any further remarks.

Henry Fernandez: Well, thank you all for joining us today. I would like to emphasize that our strategy last year and going forward is to significantly increase the pace of growth of our existing product segments like Index and Analytics with our traditional client segments of asset owners, asset managers, hedge funds, broker-dealers, etc., and simultaneously step up significantly the pace of development and growth of our newer product lines, such as Climate and PCS, sold to the traditional client base and newer client bases like GPs, banks as principals, insurance companies, market makers, and other parts of that trading ecosystem. Ultimately, we aim to become an even bigger long-term compounder of growth, which has always been our goal.

We are underway on that strategy. The benefit of what you are seeing is that this is not growth in the periphery; this is growth in the existing big parts of the product line with existing clients, highly supplemented by the newer product lines and the newer client segments to add to that growth. We are very optimistic. It is an all-weather franchise—diversified across products, client segments, and asset classes. The question is how far and how aggressively we can optimize and monetize it to develop compound growth over the years and significant value creation for all of our shareholders, including our shareholders in the management team. Thank you very much.

Operator: Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.

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